Although specific details were not immediately disclosed on how the program would operate, nearly all SUNY campuses, as well as a select group of private universities, would become tax-free havens for startups, companies moving to the state and even established firms looking to expand. Income tax — for both business owners and employees — would be among the taxes waived over a 10-year period.

Although its corporate income tax rate is middle of the road, New York's overall business taxes are considered to be the highest in the nation, a reputation that makes it hard to attract new businesses as well as startups backed by venture capital.

"It is an innovative approach and illustrates that we can and should do more to make the state's overall economic climate more competitive," said Heather Briccetti, CEO of The Business Council of New York State.

Cuomo's plan was panned, however, by CSEA, the state's powerful public sector union. CSEA President Danny Donohue said the tax breaks would only lead to more state spending cuts, which have resulted in the loss of 60,000 public sector jobs since 2010.

"It's even more outrageous that the governor and legislative leaders think we can give away even more to businesses without any guarantee of benefit to taxpayers," Donohue said.

Although the creation of tax-free zones is not a novel idea, the use of a public statewide university system for their location appears to be. Most states that have created tax-free zones to encourage job growth have done so in targeted areas of the state with high unemployment. New York had its own Empire Zone program that provided tax credits — including on business income. But the program was discontinued during the Paterson administration after widespread abuses were found. At its height, the Empire Zone program was costing the state nearly $600 million annually.

A report issued last month by the Small Business & Entrepreneurship Council ranked New York among the worst in the nation for small businesses and startup firms, with Texas, which has no state corporate income tax, as the best place to start or grow a business.

New York's top corporate rate is above 8 percent. The report said that the corporate income tax is a key driver in investment and location decisions, especially since it has such a large impact on profits.